Public sector pay rises capped at 1%

Summer Budget 2015: Pay rises in the public sector are to be capped at 1% for a further four years, Chancellor George Osborne announced during the Summer Budget today (8 July).

This cap will begin in 2016-2017. The measure is expected to save around £5 billion by 2019-20.

Osborne (pictured) said: “I know there has already been a period of restraint, but we said last autumn that we would need to find commensurate savings in this parliament.

“So to ensure we have public services we can afford, and to protect more jobs, we will continue recent public sector pay awards with a rise of 1% per year for the next four years.

“Public spending should reflect public priorities, and we have to make choices.”

Mark Beatson, chief economist for the Charted Institute of Personnel and Development (CIPD), added: “The announcement of a 1% pay ceiling for four years may be more challenging than pay restraint proved to be in the last parliament. Then, private sector average earnings were falling in real terms.

”According to the Office for Budget Responsibility, average earnings will grow at an annual rate of nearly 4% a year from 2017 onwards, which could lead to increasing recruitment and retention problems where the public sector is competing with the private sector. Therefore, employers must be even more creative in how they use their reward package to attract, retain and engage employees.”